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2016 (9) TMI 811 - ITAT HYDERABAD

2016 (9) TMI 811 - ITAT HYDERABAD - TMI - Validity of proceedings u/s. 153C - Held that:- As can be seen from the satisfaction recorded by the AO while initiating proceedings u/s. 153C, there is neither any linking up of the documents nor any finding that certain seized documents pertain to assessee. Moreover, AO also has not recorded any satisfaction while initiating proceedings u/s. 153C. In view of this, we are of the opinion that there is no satisfaction recorded by the AO, as required under .....

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d in favour of assessee. - I.T.A. No. 1329/HYD/2014 - Dated:- 10-8-2016 - SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For Assessee : Shri P. Murali Mohan Rao, AR For Revenue : Shri A. Seetharama Rao, DR ORDER PER B. RAMAKOTAIAH, A.M. : This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-III, Hyderabad dated 17-04-2014. Assessee has preferred the following grounds in her appeal: 1. The Ld. CIT(A) - III, Hyderabad erred both i .....

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ai Special Bench in the case of M/s. All Cargo Global Logistics Ltd., vs. DCIT, Central Circle 44, Mumbai and allowed the appeal of the assessee. 5. The Ld. CIT (A)-III, Hyderabad erred in sustaining the addition towards undisclosed profit for ₹ 5,27,500/- ignoring the expenditure incurred by the Appellant towards development of land. 6. The Ld. CIT (A)-III, Hyderabad ought to have deleted the addition of ₹ 5,27,500/- properly appreciating the evidence furnished by the Appellant in t .....

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any time before or at the time of hearing of the appeal . 2. In addition to questioning the proceedings u/s. 153C of the Income Tax Act [Act], assessee has raised additional grounds as under: ADDITIONAL GROUNDS OF APPEAL 9. The Ld. CIT(A) erred in upholding the Order of the Assessing officer by invoking the provisions of section 153C of the Act for the assessment year 2004.05, there being no satisfaction recorded by him as well as by the Assessing Officer having jurisdiction over the company se .....

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emises of M/s. Madhucon Projects Ltd. does not belong to appellant for the year under consideration and that the proceeding u/s 153C cannot be initiated. Case law: Dr. N.Pawan Kumar Vs. DCIT [ITA Nos.1568 & 1569/Hyd/2013]. 12. The Ld. CIT(A) ought to have appreciated the fact that no addition can be made to the income of the assessee without there being any incriminating material found during the course of search while framing assessment u/s 143(3) rws 153C of the Act . 3. In support of the .....

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recorded in the case of M/s. Shettys Pharmaceuticals and Biologicals Ltd., which was decided by the Hon ble ITAT and was upheld by the Hon ble High Court of AP in ITTA No. 662/2014 dt. 26-11-2014 [57 Taxmann.com 282]. 5. Ld. DR submitted that the order sheet placed on record is as per the assessment record obtained by him. 6. On considering the rival submissions and perusing the documents placed on record, we are of the opinion that the proceedings initiated against assessee u/s. 153C are not as .....

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ng the assessment year relevant to the previous year in which search is conducted or requisitioned is made. Thereafter assessment would be framed as per the provisions of section 143. Section 153C deals with the situation where the AO is satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitions belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or a .....

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y, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belong to some other person, he after forming the belief to that extent regarding the same shall hand over the relevant material to the concerned AO having jurisdiction over such other person. 6.2. Before initiating proceedings u/s.153C, the AO, who has initiated proceedings for completion of assessment u/s.153A should be satisfied that there is incriminating material belonging to .....

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completion of assessment of a searched person u/s.153A or during the stage of the assessment proceedings. The satisfaction note could be prepared at either of the following stages: (a) At the time of or along with initiation of proceedings against the searched person u/s.153A; (b) Along with the assessment proceedings u/s.153A; (c) Immediately after the assessment proceedings are completed u/s. 153A of the searched person; 6.3. Thus, the condition precedent for issuing notice under section 153C .....

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ing the course of assessment proceedings. Therefore, the proceedings u/s.153A always precede the proceedings u/s.153C and without recording satisfaction note by the AO initiating proceedings for completion of assessment u/s. 153A cannot be proceeded u/s.153C in the case of such other person not searched. 6.4. The main difference in the language is that in section 158BD the scope of jurisdiction of AO is only with respect to the undisclosed income found during the course of search, whereas in sec .....

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tion of proceedings u/s.153C is not proper as there is no satisfaction recorded by the AO having jurisdiction over the person searched or requisitioned u/s.132A during the course of assessment proceedings of searched party or later before issue of notice u/s.153C. Accordingly, the assessment framed u/s.153C in the assessment year has to be quashed. 7. Similar facts exist in the case of M/s. Shettys Pharmaceuticals and Biologicals Ltd., (supra), wherein Co-ordinate Bench of ITAT has considered th .....

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t of income of any other person 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 1. )3, where the Assessing Officer is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed .....

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referred to in sub- section (1) of section 153A. (emphasis supplied) It is therefore clear that firstly satisfaction has to be recorded by the Assessing Officer who conducted search, that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in Section 153A of the Act. Thereafter, the Assessing Officer having jurisdiction over third party on receipt of the seized m .....

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nd others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding u/s. 153C of the I.T.Act. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging .....

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of law to be decided . 8. Similar view is also taken by the Hon ble Delhi High Court in the case of Pepsico India Holdings (P.) Ltd., [50 Taxmann.com 299] (Delhi) wherein on the following facts, it was held as under: A search and seizure operation under section 132(1) was conducted on the Jaipuria Group during which certain documens belonging to the petitioner were found. Consequently, the Assessing Officer of the Jaipuria Group prepared a satisfaction note to the effect that the documents menti .....

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sing Officer issued notices to the petitioner under section 153C seeking to reopen the assessments of the petitioner for the assessment years 2006-07 to 2011-12 and to follow the procedure prescribed under section 153A._ In response to the said notices, the petitioner submitted its objections which were rejected by the Assessing Officer and the petitioner was directed to comply with the assessment proceedings under section 153C. On writ: HELD In order that the Assessing Officer of the searched p .....

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3C do not get attracted because the very expression used in section 153C is that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A .... In view of this phrase, it is necessary that before the provisions of section 153C can be invoked, the Assessing Officer of the searched person must be satisfied that .....

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ion of a searched person does not necessarily mean and imply that they belong to the person who holds the originals. Possession of documents, and possession of photocopies of documents are two separate things.While the Jaipuria Group may be the owner of the photocopies of the documents, it is quite possible that the originals may be owned by some other person. Unless it is established that the documents in question, whether they be photocopies or originals, do not belong to the searched person, .....

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